Pension or Buy to Let portfolio, which makes more money?
Discussion
Simpo Two said:
I posted on this a couple of weeks ago.
Frankly this is no more than (another) PR piece and essay follow-up by the forum's resident blogger and self-promoter.
As opposed to the forums (very much) non-expert, who appears to feel compelled to respond to almost every Finance thread...?Frankly this is no more than (another) PR piece and essay follow-up by the forum's resident blogger and self-promoter.
CrouchingWayne said:
Out of interest, how many BTL's do people take on that are geographically quite far away from their home town? Just curious as if I ever did this I wouldn't feel comfortable with more equity in my local market over the long term.
I'm looking for one in Swansea or the Gower Peninsula, quite a way away from the East Midlands. But I've spent far too long procrastinating. It's age.. Without engaging in this directly I would simply point out,
- "Which makes most money" is pretty meaningless unless you also take into account the hassles of property repairs, bad tenants, general management and also the significant illiquidity issue with property.
- The answer you get will depend on the start date and finishing date of your comparison.
- The answer will also depend upon whether you are looking at UK only or taking a wider view.
- The answer will also depend upon what exactly is in the portfolio.
Ginge R said:
Not even a blend of different types of commercial, different types of residential, and in different parts of the country?
To be properly balanced, you ought to be in different countries, too. I don't think Wales would count in this respect 
The main problem with balancing a portfolio like this is that every single asset is relatively huge for most mere mortals. It's easy to balance a few K across unit trusts but you just can't do that with property.The main aspect which annoys me because it is never added on the cost side for these analyses is the investor's time. Dealing with paperwork, refits, maintenance takes up the hours, even if you subcontract most of it. It's not a proper business analysis until you cost those hours and put them into the mix.
To other's complaints, I don't see why you can't attempt a comparison with equities, though. There may be many variables but to just throw hands up in the air and say they are impossible to compare is cowardly. Instead, why not read the article and apply your own variables / risk approach?
sidicks said:
A pension is an investment wrapper, buy-to-let is an asset class.
Not sure how you'd credibly compare the two...Looks like the article actually compares leverage property investment with tax efficient equity investment!
I think this is an important point which no one has picked up on.Not sure how you'd credibly compare the two...Looks like the article actually compares leverage property investment with tax efficient equity investment!
Imagine if you borrowed £90k from the bank at 5% pa interest, invested it in a stocks and shares ISA along with £10k of your own money and proceeded to get a 10% pa return. After 25 years you pay back the £90k (the 5% pa interest has been paid each year). How much money have you now got? And how does that compare with taking out a £90k mortgage on similar terms for a BTL?
People looking at BTL investments ignore the huge risk from the leverage involved in a mortgage.
Zigster said:
People looking at BTL investments ignore the huge risk from the leverage involved in a mortgage.
Shares are leveraged as well though! If I remember correctly the capitalisation of the average FTSE 100 company (excluding banks and insurers), it implies that the equity market cap is around 50-60% of the total enterprise value. For banks and insurers that number is going to be more like 5-10% (1% for Deutsche Bank!)Behemoth said:
To be properly balanced, you ought to be in different countries, too. The main problem with balancing a portfolio like this is that every single asset is relatively huge for most mere mortals. It's easy to balance a few £k across unit trusts but you just can't do that with property.
Yes, that's the way I see "balance". Balanced both geographically and by asset class.Gassing Station | Finance | Top of Page | What's New | My Stuff